Title:
Cheap Mortgage
Rate
Word Count:
604
Summary:
Must-Ask
Questions When You Get Your Mortgage
Whether you're buying a house or refinancing, there is more to a mortgage than
the rate. Here are eight questions to ask while mortgage shopping. You'll have
to ask yourself some of these questions; others can only be answered by
mortgage professionals and insurers.
How long do I plan to stay in the house?
That's often a hard question to answer. Try anyway because a lot of your
decisions depend on the answer.
The answe...
Keywords:
mortgages,
finances, business, money
Article Body:
Must-Ask
Questions When You Get Your Mortgage
Whether you're buying a house or refinancing, there is more to a mortgage than
the rate. Here are eight questions to ask while mortgage shopping. You'll have
to ask yourself some of these questions; others can only be answered by
mortgage professionals and insurers.
How long do I plan to stay in the house?
That's often a hard question to answer. Try anyway because a lot of your
decisions depend on the answer.
The answer affects whether you would be better off paying points to lower your
rate, whether you should get a fixed-rate or adjustable-rate loan, whether you
should accept a prepayment penalty. If you're thinking of refinancing, the
answer helps you decide whether you should refinance at all.
If you have no idea how long you'll live in the house, keep in mind that
homeowners stay in one residence for a median duration of 8.2 years, according
to census data. In other words, half of homeowners move within 8.2 years. The
other half, naturally, stay in their homes longer. Do you feel
"average"? If so, maybe it means you'll stay home for about eight
years or so. (FYI, with renters, the median stay in one residence is 2.1
years.)
How much are the costs of getting the loan?
When you apply for a loan, you'll get a federally mandated document called the
'Good Faith Estimate' of closing costs. It estimates how much the lender will
charge you for origination and discount fees, an appraisal, a credit report,
document preparation, title insurance, a pest inspection and a myriad of other
costs. Compare good faith estimates and especially take note of the line that
reads "Estimated cash at closing." That's an educated guess of how
much you'll have to pay out of your checkbook to get the loan.
How long will it take to break even?
If you're buying a home, how long will it take to break even if you pay
discount points to get a lower rate? If you're refinancing, how long will it
take to recoup the closing costs from your monthly savings?
In either case, all you have to do is divide the upfront cost (of discount
points if you're buying a house and of all the closing costs if you're
refinancing) by the monthly savings you would get. That tells you how many
months it will take to break even. If it's going to take five years to break
even but you expect to stay in the house four more years, it's probably not
worth it.
What makes me feel comfortable?
Bitton says some of her clients insist on paying zero discount points, while
others want to pay a lot of points to get absolutely the lowest interest rate,
"even if it takes four or five years to break even."
As far as Bitton is concerned, there often is no right or wrong answer when
people ask whether they should pay discount points or choose a 15-year or
30-year mortgage. "There's not just an objective, dollars-and-cents
number," Bitton says. "There's also the psychological factor: What
are you going to feel comfortable with?"
She has clients in their 70s and 80s who get 30-year mortgages because that's
what makes them feel comfortable. Some homeowners would rather refinance once
and never have to bother with refinancing again, so they pay a lot of points
for a rock-bottom rate. As a bonus, they have something to boast about at
cocktail parties. Other clients simply want the lowest possible payments, so
they snag an interest-only, five-year ARM. All understand what they're getting
into and have found their comfort zones.